Intent to violate stay order is not contempt

Court: Mortgage lender must actually ignore order

A mortgage lender cannot be found in contempt of ignoring a stay order simply because it expressed its intent to violate that order in the future, the Arizona Court of Appeals has ruled.

The judges dismissed the contempt order -- and reversed the financial penalty levied against BMO Harris Bank -- saying there was no evidence the lender had actually ignored any order of the trial court. Absent that, the appellate judges said, there can be no contempt.

The case involves Brian Myers, who sued to prevent BMO from proceeding with trustee's sales of four parcels he owned in Sedona.

On Feb. 22, 2011, Yavapai County Superior Court Judge Michael Bluff issued a temporary restraining order stopping the sales. Myers then sought a preliminary injunction, alleging there were deficiencies in the foreclosure documents. Bluff denied the request, and the restraining order expired.

At Myers' request, Bluff reinstated the order to allow time to appeal the denial of the injunction as long as Myers filed a notice of appeal within 10 days and posted a bond. According to court records, he did both.

While that appeal was pending, BMO canceled the original notices of trustee's sales and issued new ones designed to cure the alleged deficiencies in the original notices. Myers then asked Bluff to order the bank held in contempt.

Bluff agreed, ruling that the bank's action in re-noticing the trustee's sale to be in "direct willful violation of this court's Feb. 22, 2011 order and the stay on appeal." As punishment, Bluff awarded Myers his legal fees and costs in the contempt proceeding.

Bluff, in his order, clarified the new restraining order precluded all trustee's sales of Myers' property, including the new ones scheduled by the bank.

In the interim, the Court of Appeals dismissed Myers' appeal as being moot given the original notices were canceled. Bluff then ordered BMO to pay $5,650 in fees and costs to Myers as a punishment for the contempt.

Appellate Judge Ann Scott Timmer, writing for the unanimous court, said Myers was legally entitled to find BMO in contempt if the bank disobeyed a court order directing a lawful act.

What that requires, she said, is first for Myers to prove that BMO violated a specific and definite order of the court. If that can be shown, Timmer said, then the burden shifts to the bank to demonstrate an inability to comply with the order.

In this case, though, Timmer said Bluff was wrong in ruling the bank willfully violated the restraining order by issuing new notices of trustee's sales.

"BMO did not violate the directive to refrain from conducting a trustee's sale because it did not, in fact, conduct a trustee's sale," Timmer wrote.

"Rather, BMO issued new notices reflecting its intention to conduct new sales," she continued. "But the reinstated temporary restraining order did not prohibit BMO from issuing new notices."

Timmer said she and her colleagues agree with Myers that the new restraining order prohibited all trustee's sales of the property, not just the ones that were the subject of the original and allegedly defective notices.

"We also agree BMO's attorney expressed an intention to proceed with the sales regardless of the temporary restraining order based on his view (that order) did not apply to sales that were newly noticed," Timmer said. "But an expressed intention to violate a court order is not a violation of that order."

She said that conclusion makes sense.

"Because intentions can change before an actual violation of an order, whether a party acts in contempt of an order is not ripe for (court) review until the order is actually violated," Timmer wrote. Anyway, she said, it is not necessary to pursue a contempt order based solely on someone's intent to defy a court order.

"Contempt proceedings at the time of an actual violation would suffice to achieve the proper ends of a contempt judgment," she said.